Gordons Legal Employment Update – 2 December 2016

Friday 2nd December 2016

Generally it seems to have been a bit of a quiet week for employment law developments, for once! But quiet in employment law terms is relative as well we all know. There is always something to report. So here it is for this week:

Employee Shareholder Status

The Chancellor’s Autumn Statement was delivered on 23 November 2016 which contained some points worth taking note of, most of which we already covered in last week’s update. However one of them is, we think, worthy of a further mention because of the apparent rationale for the change.

So very soon after its introduction, the Employee Shareholder Status (ESS) framework is to be abandoned. Originally heralded by the last government as a way of removing unfair dismissal rights, it seems the scheme has failed and one of the key reasons for this is that it had been hijacked by the tax avoidance gurus.

Reportedly, there is evidence that high earners have been using such schemes for tax planning purposes. Who’d have thought it! Well I never!

The original idea (which many of us deemed flawed from the get-go) was that individual employees were allowed to give up some of their statutory employment rights in return for shares in the company which employed them so long as they received independent legal advice at the time.

Generous tax advantages were offered for shares up to an initial value of £50,000 which would be exempt from capital gains tax on first disposal. Earlier this year, the former Chancellor reigned this in considerably with a cap of £100,000 on the allowable tax free gain so the death knell for ESS schemes had already been sounded, it seems. From today, 1 December 2016, these schemes are abolished unless the ESS shares have already been issued before today.

Disability Discrimination

Although not an employment case as such, the BBC reported this week that a wheelchair dancer was suing a company after being banned from the dancefloor for allegedly damaging it with his wheelchair.

The report commented that Fred Walden, 54, says he was humiliated when staff at a Jive Addiction event last October told him to stop dancing and that he is suing the company for discrimination under the Equality Act. Last October, Mr Walden was at a dance event and competition organised by Jive Addiction Limited in a west London hotel when he was told to stop dancing by a member of the company’s staff because his wheelchair was damaging the floor.

The report went on that the company claims its policy, “which bans anyone using an object that damages the floor, is not discriminatory”.

Comment: Isn’t it a shame that there are still employers and others who still fundamentally misunderstand the Equality Act believing that having a policy which treats everybody the same is compliant. This case is yet another example. That said, it also emphasises that understanding rights and obligations under the Act is not necessarily straightforward. No doubt they will now be getting the expert advice they should perhaps have taken earlier!

The Taylor review on modern employment practices

Yesterday saw the commencement of the Taylor review, which will consider the impact of changes to the labour market and address questions on issues such as wage levels and employees’ rights.

An expert panel of three members have been appointed to support the 6 month review. The panel will travel country-wide talking to employers and employees gathering evidence about the modern labour market. In particular, the panel will be meeting and speaking with employers and workers in sectors such as manufacturing and gig economies, in order to recognise the impact of modern working practices and how different labour markets operate.

Margot James, Business Minister, said: “The Taylor review is a hugely important step towards us ensuring fairness for everyone in work. Helping us to understand what impact modern employment practices have on workers will inform our forthcoming industrial strategy and also help us ensure our labour market and wider economy works for everyone… But it is also crucial that workers receive a decent wage and that people working in all sorts of jobs are able to benefit from the right balance of flexibility, rights, and protections.”

Earlier this week, a green paper on reforming corporate governance was published by the Government to ensure workers and consumers views and concerns were sufficiently represented in the boardroom.

Comment: We consider that a significant focus of the review will be in relation the apparent rise in self-employment (particularly those individuals who are being defined as being self-employed, where in reality they may be classed as ‘workers’ or ‘employees’ – Uber, Deliveroo, etc.) and how the rights of these individuals can be better protected. Further, in light of the pending Brexit, are we likely to see a recommendation to shed other Euro rights sooner rather than later? As they say all too often, we will have to wait and see.

New advisory fuel rates for employers with company car schemes

The Government has published the latest quarter’s revised advisory rates, which apply to all journeys made on or after 1 December 2016. The rate for petrol cars have increased by 1p for engine sizes over 1400cc. The remaining rates for engine sizes of 1400cc and under and all of the rates in respect of LPG and diesel have remained the same. Employers may use either the previous or new rates for up to one month after the introduction of the new rates on 1 December 2016. The new rates can be found here.

Income Tax (Pay As You Earn) (Amendment No 3) Regulations 2016

The amendments outline a voluntary framework that permits employers to deduct tax from employees’ pay in respect of certain benefits in kind that they provide to their employees through PAYE. This includes non-cash vouchers received, and credit tokens used, by employees from 6 April 2017 onwards. However, an employer cannot voluntarily payroll the benefit of non-cash vouchers and credit tokens where those benefits are treated as payments of PAYE income under ss 694 and 695 of the Income Tax (Earnings and Pensions) Act 2003. These changes come into force on 19 December 2016.

Proposed increases to SMP and SSP for April 2017

The Government has published a proposal for new maternity, SSP and related benefit rate for 2017 to 2018. The proposal is that from April 2017 the following rates will apply:

The standard rate for SMP will increase to £140.98 per week (from £139.58).

The rate for SPP, SAP and SSPP will increase to £140.98 per week (from £139.58).

The rate for Maternity Allowance will increase to £140.98 per week (from £139.58).

The rate of SSP will increase to £89.35 per week (from £88.45).

The weekly lower earnings limit, that applies to NI contributions is set to rise from £112 to £113.

Comment: A timely reminder to consider next year’s budgeting process and to review your sickness absence costs and statistics perhaps?

If you require any further information on the above developments please do not hesitate to get in contact with a member of the Employment Team, on the following number 0113 227 0100.